WASHINGTON — Independent financial advisers blasted the Municipal Securities Rulemaking Board for its draft muni-adviser fiduciary duty rule, saying it targeted independent FAs while virtually exempting underwriters, some of which market themselves as advisers.

The National Association of Independent Public Finance Advisors unleashed its frustrations in a letter commenting on the MSRB’s draft Rule G-36, which the board released in February. The draft rule would require advisers to act in their muni client’s best interests, rather than their own.

In the interpretive notice accompanying the draft, the MSRB outlined a series of mandatory disclosures governing compensation and conflicts of interest. That provision, coupled with an exemption in the Dodd-Frank Wall Street Reform and Consumer Protection Act for broker-dealers serving as underwriters, has generated concern among independent muni advisers.

According to the independent FAs, muni advisers must comply with the Securities and Exchange Commission’s proposed muni-adviser registration scheme and draft Rule G-36.

But broker-dealer FAs with issuer clients, the independent advisers say, have largely evaded the fiduciary duty rule’s reach.

“In short, the MSRB has placed shackles on the shepherds and told the wolves they should be nice to the sheep,” wrote Colette Irwin-Knott, president of NAIPFA and a partner at H.J. Umbaugh & Associates in Indianapolis.

Specifically, NAIPFA said, the MSRB’s “misguided” approach focused less on “real-world problems than on those that the MSRB imagines issuers care about.”

As an example of such a real-world scenario, NAIPFA cited a March 22, 2011, letter to an issuer from an underwriter that touted itself as a “full-service” financial adviser “with underwriting capabilities.”

The underwriter said it was important to understand this distinction when comparing its services to those of other FAs, adding that it could conduct competitive and negotiated bond sales.

NAIPFA submitted a copy of the letter to the MSRB, with redactions obscuring the names of the issuer and underwriter. In the letter, though, the underwriter said it had ranked No. 1 for competitive and negotiated issues of $10 million or less in Wisconsin since 2003.

According to data from Thomson Reuters, Robert W. Baird & Co. has been the top-ranked underwriter in Wisconsin since 2003 for such small deals, with $3.99 billion in 1,195 issues.

In its comment letter, NAIPFA asked the MSRB to amend draft Rule G-36 by removing required disclosure of conflicts stemming from compensation arrangements. As an alternative, NAIPFA said, the board should require broker-dealer underwriters to provide similar information.

“By seeking to impose significant disclosure and other requirements on independent advisers, while conspicuously exempting underwriters from similar requirements,” Irwin-Knott wrote, “the MSRB creates the patently false impression that independent advisers pose a greater threat to an issuer’s health than underwriters do.”

In two separate interpretative ­releases on Rule G-17, issued the same day as draft Rule G-36, the MSRB would ­extend G-17’s fair-dealing requirements to muni advisers and underwriters. The board said the requirements would ­apply to underwriters of a negotiated issue that recommends a complex municipal ­securities financing, such as a variable-rate demand obligation with a swap.

In that case, the board said, the underwriter would have to disclose all material risks and characteristics of the financing, including incentives for the underwriter to recommend the financing and other conflicts of interest.

Still, several independent FAs echoed NAIPFA’s concerns and asked the board to reconsider, or at least clarify, its guidance about underwriters.

In a comment letter dated April 8, the muni market’s largest financial adviser, Public Financial Management Inc., said the MSRB should make clear that Rule G-36 “applies fully” to a broker-dealer’s muni adviser activities with an issuer.

According to PFM general counsel Joseph Connolly, who signed the letter, the MSRB’s proposed disclosure requirements are “insulting” to FAs and issuers. The board has not required underwriters — who have been subject to Rule G-17’s fair-dealing requirements for more than three decades — to provide issuers with information about their compensation, he noted.

“That’s not a hypothetical, possible conflict of interest,” Connolly wrote. “That’s a reality that every municipal issuer faces.”

Similarly, in a comment letter dated April 11, David Levy, a principal at Municipal Regulatory Consulting in West Windsor, N.J., said draft Rule G-36 might have the unintended consequence of “creating an unlevel playing field ­between advisors and underwriters.”

The Securities Industry and Financial Markets Association also asked the MSRB to clarify its draft G-36, saying the board must not ban advisers from acting as a principal in matters concerning the advisory engagement.

“Such a ban is not required to protect investors and is not consistent with congressional intent or similar regulatory regimes,” wrote Leslie Norwood, SIFMA’s managing director and associate general counsel.

In its G-36 notice, the MSRB said a muni adviser could not accept an engagement when certain “unmanageable” conflicts of interest existed, including kickbacks and acting as a principal in matters concerning the muni-adviser engagement.

SIFMA also asked the MSRB to seek additional comments on its G-36 draft after the SEC has adopted final rules governing muni-adviser activities. The comment period on the SEC’s proposed muni-adviser registration period ended in February. The comment period for the MSRB’s G-36 and G-17 proposals ended Monday.